Goldway: PRC To Issue Ruling On Ending Saturday Delivery By End Of Year
The arrival of the holiday season brings with it thoughts of reflection, celebration and special times spent with family and friends. Traditionally, the end of the year also brings with it an increase in commerce and mailing activity. We are hopeful that will be true again this year as the economy and the Postal Service begin to recover from recession.
For the Commission, the coming months promise to be both busy and noteworthy. By year’s end, we expect to issue our Advisory Opinion in Docket N2010-1 evaluating the Postal Service’s proposal to eliminate Saturday mail service to homes and businesses nationwide. The Commission plans to conclude its public inquiry and issue its findings in Docket PI2010-1, on the emergency suspension of post offices.
The joint Commission-Postal Service Periodical Study is near completion and the findings, which are critical to resolving periodical cost coverage and pricing issues, will be posted on our website. The Commission hopes to issue its decision in the complaint of GameFly, Inc. against the Postal Service, in the near future. This would be the first Commission decision under its complaint authority established by the Postal Accountability and Enhancement Act (PAEA).
On November 2nd, the Commission opened Docket CP2011-26 to review the Postal Service’s request for a general increase in competitive product postage rates. We will solicit public input and issue our decision by December 2nd. The Commission also will seek input on new rulemaking proceedings, issue its third annual report under the PAEA, and begin the Annual Compliance Determination (ACD) process to assess Postal Service performance for fiscal year 2010 (FY2010). The ACD review is critical to Commission oversight and postal transparency. The Commission also has 14 pending dockets to complete from FY 2010, having completed a record 183 dockets in the past year.
Like the proverbial elves in Santa’s toyshop, the Commission has much to do to finish the year and we are responsible for many deliverables. You can be sure that we will stay focused and productive, and we will deliver.
Thank you for your support during the past year and in the future. Best wishes for the holidays and the year ahead.
Ruth Y. Goldway
Chairman
Breaking News: Postal Regulatory Commission Denies USPS Rate Increase Request
The Postal Regulatory Commission announced its decision rejecting the requested price hike at a news conference Thursday.
“After careful consideration, the Commission agreed with the Postal Service that the recent severe recession, and the decline in mail volume experienced during the recession, do qualify as an extraordinary or exceptional circumstance under the law. However, the Commission finds that the requested exigent rate adjustments are not due to the recent recession, or its impact on mail volume. Rather, they represent an attempt to address long-term structural problems not caused by the recent recession. The Commission finds, therefore, that the Postal Service has failed to meet its burden under the law and the Commission is unanimous in denying its request for an exigent rate increase..”
The new rates would have taken effect next Jan. 2.
Text of the Postal Regulatory Commission’s press release:
Washington, DC – The Postal Regulatory Commission today issued Order No. 547 in Docket
R2010-4 denying a Postal Service request for an average 5.6 percent rate increase. The Commission
found that the Postal Service failed to justiff rate increases in excess of its statutory CPI price cap.
“The Commission finds that the Postal Service has shown the recent recession to be an exigent
circumstance but it has failed both to quantifo the impact of the recession on its finances and to show
how its rate request relates to the resulting loss of mailvolume; therefore, we unanimously deny its
exigent rate request,” said Chairman Ruth Y. Goldway.
The law requires the Postal Service to demonstrate that any exigent rate adjustments are due to the
identified exceptional circumstances. This prevents a bona fide extraordinary or exceptional
circumstance from being used as a general rate increase mechanism that would circumvent the price
cap system.
The Postal Service’s recent volume losses and multi-billion dollar shortfalls are recognized. However,
Commission analysis confirms that the Postal Service’s cash flow problem is not a result of the
recession and would have occurred whether or not the recession took place. lt is the result of other,
unrelated structural problems and the proposed exigent rate adjustments would neither solve nor
delay those problems.
The Postal Service may be unable to continue to meet a statutory 1O-year payment schedule -
averaging roughly $5.5 billion per year – to create a fund to pay future retiree health benefit
premiums. lt has been unable to fund this obligation from operations, and has instead used up all of
its retained earnings and drawn down from its $15 billion borrowing authority. Even with the
requested increase, the Postal Service would be unable to meet this annual obligation either in 2011,
or in succeeding years.
The Postal Service achieved over $6 billion in cost reductions in 2009. While volume declines
outstripped cost reductions during the actual recession, Postal Service cost containment programs
are producing results and work hours have declined faster than volumes in 2010.
Goldway also said that the USPS could implement a 1.6-2% increase under the normal price cap process.
Statement of PRC Chairman Ruth Goldway
Summary of PRC hearing: Chairman Goldway Says USPS May Not Have Taken Full Advantage Of Postal Reform Act
From Postcom.org
At the Postal Regulatory Commission: (focus: testimony of Stephen J. Masse, V.P. Finance and Planning, USPS)
- The Postal Regulatory Commissioners started the day by acknowledging the contributions of the late senator from Alaska, Ted Stevens, who died in a plane crash yesterday.
- In response to modest gains in mail volume, largely in quarter one, the USPS’ workhours are up compared to plan.
- Twelve FSS machines are operating in five locations thus far. Massey said the USPS is still working on the equipment and fine tuning it.
- Massey told the Commission that, in the near-term, the greatest benefit to the USPS could come from changes to its pre-funding requirements. He said the exigency increase won’t be of any help until QII in FY2011, and, even at that, the benefit will be only on the order of $2 billion.
- He said the exigency increase won’t be of any help until QII in FY2011, and, even at that, the benefit will be only on the order of $2 billion.
- Massey said that the USPS would need to raise prices over one-to-two years by 25% if the Postal Service were to use the exigency provision to satisfy the USPS’ immediate needs.
- The USPS had considered filing an exigent price increase request last year, but demurred because of the recession, and because such an increase wouldn’t be the “silver bullet” for meeting the USPS’ longer term needs.
- The Postal Service had been operating under the assumption that mail volume would return after the recession.
- Massey said he believed postal customers had received some benefit from the nation’s very modest economic recovery. [His answer came in response to a question from Commissioner Blair as to whether Massey thought that customers would do equally well in the face of a double-dip # recession. The implication? They can afford it. It's a matter of "sharing the pain."]
- Massey implied that the USPS cannot successfully operate under the current law in the face of economic downturns.
- He said “only time would tell” whether the USPS would be back asking for yet another exigency rate increase if the economy were to go sour.
- Massey said that if the USPS got some measure of relief from Congress, it would not be facing a liquidity crisis through FY2011. The USPS actually would not be facing a liquidity crisis until 2015.
- Commissioner Blair said that it appeared as if this case was merely “papering over” some other more significant issues before the Postal Service. It would seem, he said, that “extraordinary or exceptional” was going to be the new way of postal life. Massey said that “only time will tell.” [EdNote: Seems as if Senator Collins is correct in her contention that the USPS seems to lurch from one fiscal "crisis" to another, and will continue to do so in the future.]
- Massey said that any exigent increases that might be approved will remain in place even at the time of any future PAEA-permitted inflation-based price changes.
- Commission Langley noted that postal forecasts are questionable, since they are based largely on retrospective perspectives, rather than those that are more consistent with changing postal market realities.
- Massey said that the present exigent request is both an effort to address an immediate anda longer-term planning need.
- Massey acknowledged that underlying this case is the belief that these prices are what the market is willing to bear.#
- * Commissioner Acton said that he had a problem with the Postal Service asking mailers to pay after they’ve already paid what was required of them to the Civil Service Retirement Fund and the pre-funding of retiree health benefits.
- Massey said that even though rate payers already have paid on these obligations, even if all these payments were appropriately credited, the USPS would still be facing a financial crisis.
- Massey said that the marketing initiatives the USPS currently has planned would not be sufficient to meet the USPS’ financial needs.
- Employee-related costs still account for 80% of all postal costs. All reductions in career employees have been actualized via attrition. There are now no specific plans for voluntary separation incentives.
- PRC Chairman Goldway said that it appeared as if the USPS has not taken full advantage of all the possibilities afforded by PAEA.[EdNote: She and her colleagues have absolutely gotten that right.]
Postal Commentator Questions PRC Chairman’s Remarks On Five-Day Delivery
From Postcom.org
The following is an extraordinary letter to the editor of the New York Times from long-time postal sage Murray Comarow:
The Postal Service’s proposal to switch to five-day delivery is complex and controversial. [New York Times article "Sides Form Over Threat to Saturday Mail Service," 7-6-10] Congress has therefore directed the Postal Regulatory Commission to study the issue; its recommendations are expected in October.
But Ruth Y. Goldway, the Commission’s Chairwoman, apparently has already made up her mind. The article quotes her as saying, “”The Postal Service in fact should be expanding its accessibility and delivery capability to meet those needs. The long-term future of the Postal Service may be limited by their interest in reducing service today.”
She is certainly entitled to her opinion, but it is safe to say that Congress expected a serious, credible study leading to recommendations by the PRC’s five presidentially-appointed commissioners. This shoot-from-the-hip comment by Mrs. Goldway is not exactly new and tends to undermine confidence in the Commission.
I don’t know how the other four commissioners feel about Mrs. Goldway’s pre-emptive remarks; perhaps the Times should ask them. I’d guess they would rightly say, “No comment until we report to Congress.”
Video: PRC Chairman Goldway Says Decision to Cut Mail Deliveries Not Final
Ruth Goldway, chairman of the U.S. Postal Regulatory Commission, talks with Bloomberg’s Lori Rothman about the Postal Service’s decision to reduce U.S. mail deliveries to five days from six. Goldway says the decision is “not final by any means” and that the commission will give the proposal a “very thorough review.” (Source: Bloomberg)
PRC: The Future of Mail in the United States
Postal Regulatory Commission:
“Within our regulatory framework, I would like to encourage a national conversation on the future of mail and hardcopy communications in the United States,” Chairman Ruth Y. Goldway. The Nation’s mail system faces serious financial challenges exacerbated by historic declines in mail volume. The Postal Service has responded by cutting costs, downsizing operations, reducing its customer-service footprint and proposing further changes – such as eliminating one day of mail delivery service – that could have significant impact on customers and service nationwide. What do these changes mean for postal customers and the Nation? The conversation to answer that question has begun. Please feel free to join in by contacting the Commission. ”
Click here for a copy of the letter sent to a variety of stakeholders, organizations and associations. A list of the recipients is also included.”